A HARD RAIN’S GONNA FALL. BY PAUL ELLISON



The Club yesterday released its delayed accounts for the year ended 31 July 2019. To put this in perspective it is SD’s first twelve months in charge and we are just about recovered from the second defeat at Wembley. Having completed the takeover just after relegation to the third tier the new owners had a real tough job on their hands getting the wage costs down to accommodate the £10m drop in sky money. Not an easy task with players on contracts with higher wages than they would get elsewhere, so how did they do?

Keeping it simple here’s the results.

Division League 1 Championship

Year July 19 July 18

£S £000 £000

Turnover 8,693 63,691 1

Cost of sales (2400) (1745)

Gross Profit 56293 61946

Overheads (46337) (88333) 2

Profit/Loss 9956 (26387) 3

Operating cost (20538) - 4

Loss (11242) (26387)

Now let’s have a look at the above

1 There is absolutely nothing that SD could do about the Sky money which fell in the year by £8.9m and to be fair despite playing in a league lower all other sources of income increased by a collective £3.9m. Gate receipts were up 31% and conferences by 52%. On this change I have to say 10/10 on a purely financial basis.

2 The next challenge was to get the wage bill down and the direct comparison is £41.4m in 2018 down to £23.5m in 2019. Some players hung in there on lucrative contracts and whilst a few buys were questionable I have to say 8/10

3 The net result of the above is turning a club around that had lost £20m (if you exclude a £6m capitalisation cost) to one that made £10m something that had not been achieved ( excluding Henderson and Pickford transfer fees) for 10 years. I am going for 9/10 which would have been 10/10 if we had gone up.

4 every silver lining has a cloud with Sunderland and there is a massive BUT. No wonder Accountants get a bad name. With little commentary the accounts drop in an “exceptional operating cost “of £20.5m. Dig deeper and you find, ”during the year an impairment loss of £20.5m has been recognised against amounts due by group undertakings”. Any wiser? Ok this is the £20m parachute payment that SD borrowed from the club via Madrox to give to Ellis Short as part of the sale price. Madrox is a shell company and had no assets when it borrowed the money and has no assets now other than the shares in the club. SD has recognised that Madrox cannot pay this money back (unless he puts it into Madrox like him and Charlie always said he would) and therefore as director of the club he has agreed to write off the debt due effectively but not legally from him.

This is just plain wrong and is not like one writer for RR explained at the time “a bit like taking money from your current account rather than savings because it’s easier and there aren’t any withdrawal costs”. No, it’s not, it’s a bit like taking money from someone else’s current account and then saying I can’t/won’t pay it back.

What I really don’t understand, and perhaps this is one for Jim Rodwell who is now legally responsible as managing director to look after the club’s interests, why on earth didn’t Ellis just take the parachute payments in reduction of his debt and SD announce that he had paid £15m for the club? Same result no smell, as any buyer doing due diligence could not possibly fail to work out the above. The purchase price of the club was circa £15m and it’s in a worse stare now than it was then as a result of Covid and a third year in League One. It’s worth what someone will pay when SD can no longer put money in to fund losses. As furlough and HMRC assistance is coming to an end that time may not be far off.


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